CDM- How Clean Is The Clean Development Mechanism?

THE KYOTO PROTOCOL

The protocol aimed to develop a mechanism which would result in a worldwide
reduction of emissions of carbon based gases by 10% below 1990 levels by 2012.
Under the Protocol industrialized countries (Annex 1) are expected to cut their
overall carbon emissions by at least 5% below 1990 levels in the commitment per
ion 2008-2012. And the developing countries are to receive help from the
industrialized nations in developing more efficient and greener technologies.

The dispute
over the Protocol is mainly about one of the alternate methods of accounting
ones carbon credits. The protocol allows a certain trading mechanism: Clean
Development Mechanism between developed and developing countries. There are
major loopholes in the Protocol that would allow developed countries to
continue emmiting the same amount of pollutants in the future as they do today.
Many also feel that the protocol is governed more by economic concerns rather
than ecological; it seems to be more of a trading agreement.

FLEXIBILTY MECHANISMS-CLEAN DEVELOPMENT MECHANISM

At the Third
Conference of the Parties (COP 3) to the United Nations Framework Climate
Change Convention (UNFCCC) held in Kyoto in November 1997, it was agreed that
three flexibility mechanisms would be created in order to increase the number
of methods available to Annex 1 Parties to reduce their GHG (green house
gas)emissions. These ‘flexibilty mechanisms’ aroused special concern. These
mechanisms were: Emissions Trading (ET), Joint Implementation (JI) and the
Clean Development Mechanism (CDM)3. Joint implementation was proposed by the
North and rejected by the South in the first round of negotiations. CDM is
simply a more economically centered revision of joint implementation.

It was agreed at Kyoto that an Executive Board would
supervise the CDM and would be subject to the authority and guidance of the
COP/MOP (MOP: Meeting of the
Parties).

This
mechanism conveniently allows developed countries to account for cuts in their
emissions by developing ‘green’ projects in developing countries. Thus, they
allow the buying or selling of national emissions or buying or selling of
reduction units from projects. This mechanism is ‘as unclear as it is
unclean’.[1]

The major points, underlying a confusing article 12 of the Kyoto Protocol
are[2];

1. The primary purpose of CDM is not to assist the south, but to help the Annex1
parties meet their commitment to reduce emissions.

2.
The committed countries which have to curtail emissions can do so by investing
in developed countries; and can do so by buying certified emission reduction
and will thereby get credit for saving carbon dioxide emissions in their own
balance sheet; the develping countries will not get any credit.

3. Investment rating companies will rate the
developing countries based on their ‘compliance capability’. This will force
developing countries to compete
with each other to be the ‘cheapest and most efficient’; and thus offer
themselves to annex 1 parties on a platter. [3]

4.
CDM is a market based instrument. The north may invest and buy carbon credits
but there is no additional aid or technology transfer which is promised.

5.
Both public and private parties can be involved in carbon trading.

PROBLEMS WITH CDM

The Clean
Development Mechanism (CDM) depends on ensuring that projects in developing
countries reduce emissions below a hypothetical baseline, ‘what would have
happened without the project’. Unlike trading and Joint Implementation (JI), it
also permits Industrialized Countries to increase their overall allowed
emissions because of the ‘credits’ earned from the reductions in developing
countries. The key issue is price; what is the cheapest price the south would be
willing to pay for its emission units? The interest is to bargain for the
cheapest and the most efficient deal. One approach to getting that is by
developing a portfolio approach which drives each project towards competition.
The World Bank’s prototype carbon fund was one of the first steps in that
direction.

With the
Kyoto protocol, one thing is unambiguous- climate change or any other global
issue cannot be dealt with in the ‘environmental lobby’, but must enter the
world of money and trade.

The World
Bank offered to perform the role of the honest broker in these trade-offs. The
proposal is to set up ‘ global markets for green house gas investments’; this
fund develops a number of projects with potential to reduce global warming in
countries which have a low contribution towards it in the first place. The Bank
would then sell these projects to industrialized countries looking to reduce
their own emissions. For example, if the United States were to assist India in
developing more efficient power stations, the credit for reducing GG emissions
would go to the States because they paid for it. While the World Bank looks at
this proposal as a ‘win-win’ situation many beg to differ; there are three main
reasons why trading credits is not a ‘win’ for anybody, according to
Environmental organisations in developing countries.

1.
Firstly, the developing countries do not get credit for the more efficient
technologies that they are using. Once these countries have reached their maximum
state of efficiency, there will be no more room for investments from
industrialized countries and the latter will have to come back home; and the
developing countries will have to manage the efficiency on their own. At this
point in time costs to reduce carbon emissions will be even higher.

2.
Secondly, it creates competition among the developing countries; for
industrialized countries to invest in them. As a result they offer themselves
on a platter, selling their rights as cheap as possible.

3.
Thirdly, the Kyoto protocol is about the creation of new property rights regime
for a global resource- the atmosphere. But this ‘commodification’ of the
atmosphere in the absence of property rights is unacceptable. The developing
countries are being asked to sell their resource in the absence of property
rights. The atmosphere is a global resource. These entitlements give room for
low level polluters to sell their unused emissions to high level polluters.

[1] [2] the Centre for Science and Environment: briefing paper
[3] developing countries will be forced to compete because CDm is disguised to
be a brilliant mechanism that will greatly benifit them with the influx of
money coming fom international Governments and co-operations.